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Square’s AI Platform Could Transform SQ Stock

James Brumley

Less than a week after payments player Square (NYSE:SQ) served up a lackluster outlook for the quarter currently underway, the company added another item to its menu. Via its acquisition of Eloquent Labs, Square can now offer an artificial-intelligence powered chat solution to its payment customers.

Square's AI platform can boost SQ stock longer term

Source: Via Square

The news didn’t revive SQ stock, which was already weakening heading into last week’s first-quarter report. Later, that bearishness accelerated despite shares topping Q1 estimates. Admittedly, the acquisition isn’t apt to make a major, measurable impact on the top or bottom lines anytime soon.

Adding an AI-chat platform to its mix, however, is no small matter when you view this in the proper context.

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Elle at Your Service

Eloquent Labs is the developer of Elle, which can converse intelligently with a customer through a conventional online-chat platform without any human input from the service provider. While resolving complex customer-service needs remain currently out of reach, Elle can easily handle simpler-but-distracting tasks like returns and product-tracking.

The deal bolsters what Square can do for its merchants, which analysts believe number well over two million. Invariably, it also boosts the investment profile of SQ stock.

Although founded as a simple payment middleman, Square has evolved into a one-stop solution provider for small businesses that must accept credit-card payments. Its point-of-sale systems can also act as inventory-management systems as well as customer relationship management solutions. Square has even developed restaurant-specific tools and apps. This notably includes the integration of Caviar, which facilities online ordering and delivery of food.

The aim, of course, is to add so much value that small vendors see little choice but to delegate the back-office work to Square. This allows proprietors to focus on their core businesses.

Square has built such a potent product, however, that larger businesses are signing up as well.

Square is generally elusive with details about its business, even with owners of SQ stock. But CFO Sarah Friar was willing to at least concede some information last year. “We have merchants that do $100 million-plus on Square today,” Friar stated, adding that the company “doesn’t see a cap anymore” in terms of merchant size.

The advent of Elle jibes with that philosophy. Square’s corporate blog post explains that “Eloquent’s conversational AI services are exactly the kind of technology that can level the playing field for businesses of all sizes by providing sellers efficient ways to interact with their customers.”


Strong but Competitive Market for Square Stock

Although they’ve been around for years, AI-powered “chatbots” haven’t become reliable business tools until recently.

Pavel Dmitriev, VP of Data Science for Outreach, explained late-last year:

Most chatbots today are rigid rule-based systems forcing users to interact with them in an unnaturally structured way, which often ends up being a frustrating experience. While I do not expect all the problems to be solved in 2019, I believe significant progress will be made…

As a proven platform, business owners are more comfortable utilizing this tech. They also take confidence in that the chatbots are increasingly becoming more human. Dmitriev believes better gathering of a buyer context and more specialization can make the technology as effective as they need to be for a particular merchant.

To that end, some observers estimate that the global conversational AI market will be worth nearly $16 billion by 2024.

Competitors aren’t readily yielding to Square on this front, however. Microsoft (NASDAQ:MSFT) announced earlier this month it would open its conversational-AI engine up to developers in the finance world.

Square rival Paypal Holdings (NASDAQ:PYPL) has long used such a platform to serve its own customers. But Paypal can deploy this AI solution to its merchant users if they want to stand up to SQ.

Square stock has something of an edge on would-be competitors, however, in that the underlying firm already has deep relationships with so many small and mid-sized businesses that have largely been overlooked by tech providers.

Looking Ahead for SQ Stock

Interest in Elle may be moderate at first.

Undoubtedly some of Square’s merchants see the need and would be willing to utilize the option if made available. However, these merchants are typically very small and localized businesses. With their customers just as likely to make a phone call or visit in person as they are to initiate a typed or voice chat, Elle is overkill. SQ stock isn’t a buy solely on the advent of an AI-chat platform, which will likely see modest initial uptake.

As Square takes aim at larger merchants though, being able to also offer Elle in addition to other existing features gives the company some added firepower on the client-gathering front.

It’s certainly nothing that can hurt SQ stock.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.

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